CP 568: Failure-to-deposit penalty computation

What CP 568 is

The IRS explanation of how a failure-to-deposit penalty was computed, produced from the FTDPN program: each liability, each deposit as applied, the days late and the rate tier. IRC 6751(a) requires that a penalty notice include the computation, and the CP 568 (or the FTDPN summary print) is how the IRS meets it (IRM 20.1.4.25, 20.1.4.23.1.1). Also used to answer a late IRC 6656(e) designation request.

The deadline

Follows the penalty notice; no separate deadline, but the 90-day 6656(e) window runs from the 23C date of the penalty notice.

What to do

Read the application order. If the IRS applied deposits to the most recent period first and an oldest-first order would be lower, send the designation request within 90 days of the 23C date. If a deposit was applied to the wrong period or the wrong EIN, that is a credit transfer request, not a penalty argument.

Reading the computation

CP 568 is the worksheet behind a failure-to-deposit penalty. The law requires that a penalty notice tell the taxpayer how the penalty was computed, and this is how the IRS does it for deposit penalties: a table of each liability (from the return or the Form 945-A), each deposit and the liability it was applied to, the number of days between them, and the rate tier that produced the penalty on each. Read it against your own records in three passes. First, do the liability dates match when you actually withheld? If the IRS is working from an averaged schedule or a 945-A with deposit dates on it, the whole table is wrong and the fix is a corrected schedule (CP 207). Second, is every deposit you made present, on the right EIN, form and period? A missing one is a credit transfer problem (CP 108), not a penalty argument. Third, how were the deposits applied?

Application order and the 90-day designation

By default the IRS applies each deposit to the most recent liability within the period, which means that when one deposit is missed, every later deposit is treated as late against the earlier liability and the penalty cascades. IRC 6656(e) lets the taxpayer designate a different application, typically oldest-first or to specific liabilities, which often collapses a cascade into a single late deposit. The designation must be received within 90 days of the date on the penalty notice, and the IRS does not have authority to honor a late one (Letter 2782-C is the refusal). So the first thing to do with a CP 568 is to recompute the penalty under an oldest-first application and, if it is lower, send the designation request at once with the CP 568 attached; the designation request template is built for it, and the deposit penalty calculator runs both orders side by side. Reasonable cause, First Time Abate, and bank-error relief are separate requests and are not limited to the 90 days; they can be made after the designation has been processed.

Questions about CP 568

Have a different notice? The IRS notice decoder lists all 77 in the order they tend to arrive.